SR - RES-SAORA-014 -OF 0 .
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AGENDA ITEM
June 10, 2014
TO: Honorable Mayor and Members of the
City Council, as Legislative Body of the
Successor Agency to the Orange
Redevelopment Agency
THRU: John W. Sibley
City Manager
FROM: Richard Jacobs
Finance Director
Lisa L. Kim
Economic Development Manager
ReviewedNerified By:
City Manager r
Finance Director
To Be Presented By:
Richard Ja obs
Cons Calendar
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1. SUBJECT
Resolution No. SAORA -014 - A Resolution of the City Council of the City of Orange, acting as
the Legislative Body of the Successor Agency to the Orange Redevelopment Agency, approving
the Successor Agency's issuance of Tax Allocation Refunding Bonds and authorizing certain
related actions.
2. SUMMARY
Due to lower interest rates, the Successor Agency is proposing to issue bonds (the "2014 Bonds ")
to refund the two series of bonds issued by the former Orange Redevelopment Agency (the
"Former Agency "), the 1997 Tax Allocation Parity Bonds, Series A (the "1997A Bonds ") and the
2003 Tax Allocation Refunding Bonds, Series A (the "2003A Bonds "). The final savings will
depend upon the market conditions at time of pricing. As shown in the attached Debt Service
Savings Analysis (the "Savings Analysis "), if the 2014 Bonds are sold based on current market
conditions (as of June 3, 2014), the estimated savings will total approximately $2.969 million
over the life of the bonds.
The Successor Agency may only issue 2014 Bonds after approval by the Oversight Board and the
State Department of Finance (the "DOF "). By adopting the attached resolution, the City Council,
acting as the legislative body of the Successor Agency, will approve the issuance of the 2014
Bonds and request the Oversight Board to also provide its approval. In addition, the resolution
will authorize the City Manager and the Finance Director to negotiate a bond purchase agreement
with Stifel, Nicolaus & Company, Incorporated, as Underwriter for the 2014 Bonds. The
resolution will approve the appointment of the Financial Advisor, Bond Counsel, Disclosure
Counsel and Fiscal Consultant for the refunding.
SAORA ITEM /2�-/ 1 6/10/14
3. RECOMMENDED ACTION
1. Adopt Resolution No. SAORA -014, and thereby:
a. Approve the issuance of the 2014 Bonds, in an aggregate principal amount not to
exceed $36 million;
b. Approve the execution and delivery of a Fourth Supplement to Indenture of Trust, in
connection with the issuance of the 2014 Bonds;
c. Request the Oversight Board to approve the issuance of the 2014 Bonds, and in that
connection, direct the City Clerk to transmit a copy of the Resolution to the Oversight
Board;
d. Authorize the City Manager and the Finance Director to negotiate the terms of a bond
purchase agreement with the Underwriter (with the bond purchase agreement to be
brought back to the City Council for approval by later resolution); and
e. Approve the appointment of Financial Advisor, Bond Counsel, Disclosure Counsel
and Fiscal Consultant pursuant to the agreements attached to this agenda report.
2. Authorize the Executive Director to execute all necessary documents related to the
engagement of the Financial Advisor, Bond Counsel, Disclosure Counsel and Fiscal
Consultant.
4. FISCAL IMPACT
As shown in the attached Savings Analysis, prepared by Fieldman, Rolapp & Associates, if the
2014 Bonds are sold based on current market conditions (as of June 3, 2014), the proposed
refunding will result in annual debt service savings of ranging from $301K to $478K a year and a
total estimated savings of approximately $2.969 million over the remaining term of the bonds.
The savings will translate to additional Redevelopment Property Tax Trust Fund ( "RPTTF ")
moneys available for other enforceable obligations listed on the Recognized Obligation Payment
Schedule ( "ROPS "), subject to DOF approval. If such moneys are not needed for other ROPS
enforceable obligations, they will become available for disbursement to taxing entities, including
the City of Orange. Based on the above - described estimates, the City may receive an estimated
average of $44,000 a year from the RPTTF residual disbursements.
Costs of issuance for the 2014 Bonds are expected to be paid out of the sale proceeds of the 2014
Bonds. Pursuant to the agreements with the Financial Advisor, Bond Counsel and Disclosure
Counsel, their fees will be contingent on the issuance of the 2014 Bonds. The Fiscal Consultant
will be paid on a fixed fee basis from the proceeds of the bond refunding.
If and when the 2014 Bonds are issued, the Underwriter will purchase the 2014 Bonds from the
Successor Agency pursuant to a bond purchase agreement. The Underwriter will then offer the
2014 Bonds for resale to investors. The Underwriter's compensation for this transaction will be
in the form of an "underwriter's discount" to be incorporated as part of the purchase price to be
paid by the Underwriter for the 2014 Bonds. Pursuant to the Resolution, Staff will present a
substantial final form of the bond purchase agreement to the City Council for approval at a later
SAORA ITEM 2 6/10/14
meeting, after the DOF's approval of the issuance of the 2014 Bond has been obtained. As part
of the presentation of the later resolution, Staff will make a recommendation regarding a not -to-
exceed amount of the underwriter's discount, based on a review of then updated market
estimates.
5. STRATEGIC PLAN GOAL(S)
Be a fiscally healthy community.
a. Expend fiscal resources responsibly.
6. GENERAL PLAN IMPLEMENTATION
Not applicable
7. DISCUSSION and BACKGROUND
Background
Pursuant to Assembly Bill X1 26 (enacted in 2011), the Successor Agency was constituted to
wind -down the affairs of the Former Agency. Assembly Bill 1484 (enacted in 2012) amended
and supplemented Assembly Bill AB X1 26 and, added among other provisions, Section 34177.5
of the California Health and Safety Code ( "HSC "). Pursuant to HSC Section 34177.5, the
Successor Agency is authorized to issue the 2014 Bonds to refund the 1997A Bonds and the
2003A Bonds (together, the "Refunded Bonds ") to provide savings to the Successor Agency,
provided that: (A) the total interest cost to maturity on the 2014 Bonds plus the principal amount
of the 2014 Bonds shall not exceed the total remaining interest cost to maturity on the Refunded
Bonds, and (B) the principal amount of the 2014 Bonds shall not exceed the amount required to
defease the Refunded Bonds, to establish customary debt service reserves and pay related costs of
issuance.
As shown in the attached Savings Analysis, the proposed refunding of the 1997A Bonds and the
2003 Bonds is expected to result in savings to the Successor Agency. The 2014 Bonds will not
be issued unless they meet the requirements of HSC Section 34177.5 as outlined above.
Discussion
The proposed 2014 Bonds will be issued to refund the remaining outstanding 1997A Bonds and
2003A Bonds. The refunding will not extend the maturity dates of the bonds.
Fieldman, Rolapp & Associates prepared the attached Savings Analysis. As shown in the
Savings Analysis, based on market conditions as of June 3, 2014, the refunding will result in: (i)
annual debt service savings of ranging from $301K to $478K a year; (ii) a total estimated savings
of approximately $2.969 million over the remaining term of the bonds; (iii) potential receipt by
the City of an estimated average of $44,000 a year from RPTTF residual disbursements.
2014 Bond Team
In order to proceed with the bond refunding, staff recommends the appointment of Financial
Advisor, Bond Counsel, Disclosure Counsel and Fiscal Consultant, comprising of the following
firms:
SAORA ITEM 3 6/10/14
• Financial Advisor (Fieldman, Rolapp & Associates)
Staff has been working with Tom Johnson and Josh Lentz from Fieldman Rolapp &
Associates to research and assemble the financial analysis to support this bond issue. The
team is familiar with the Former Agency's 2003 and 2008 bond issuances. A copy of the
agreement with Fieldman, Rolapp & Associates is attached. According to such
agreement, assuming that par amount of $29.8 million for the 2014 Bonds, the
compensation due to the Financial Advisor at closing will be $40,750.
In addition, Applied Best Practices (ABP) is an affiliate of Fieldman, Rolapp &
Associates will provide an analysis of past continuing disclosures as required by all
existing outstanding bond issuances for the City and the former redevelopment agencies
for a fixed of $3,000. If any discrepancies are identified during the analysis, ABP will
complete any missing disclosures at a cost not to exceed $2,000 plus expenses.
• Bond Counsel (Richards, Watson & Gershon)
The law firm of Richards Watson & Gershon ( "RWG ") has been retained to serve as
Bond Counsel for this issuance. RWG served as Disclosure Counsel for the Former
Agency's 2003 bond issue and as Bond Counsel for the Former Agency's 2008 bond
issue. RWG also has served as Special Counsel to the Successor Agency in matters
related to redevelopment dissolution and bond inquiries. A copy of the bond counsel fee
agreement with RWG is attached. According to such agreement, assuming that par
amount of $29.8 million for the 2014 Bonds, the compensation due to Bond Counsel at
closing will be $64,800.
• Disclosure Counsel (Quint & Thimmig, LLP)
The law firm of Quint & Thimmig has been engaged to act as disclosure counsel for this
bond refunding. Quint & Thimmig was Disclosure Counsel Former Agency's 2008 bond
issue. A copy of the bond counsel fee agreement with Quint & Thimmig is attached.
According to such agreement, assuming that par amount of $29.8 million for the 2014
Bonds, the compensation due to Disclosure Counsel at closing will be $40,000.
• Fiscal Consultant (Tierra West Advisors)
John Yonai with Tierra West Advisors has been engaged to act as the Fiscal Consultant
for this issuance, not on a contingency fee basis. A copy of the Agreement with Tierra
West Advisors in the amount not to exceed $25,255 is provided.
The Financial Advisor, Bond Counsel and Disclosure Counsel will be paid on a contingency fee
basis from the proceeds of the bond refunding. The Fiscal Consultant will be paid on a fixed fee
basis from the proceeds of the bond refunding. Pursuant to HSC Sections 34177.5(f) and
34180(b), the issuance of the 2014 Bonds is subject to the Oversight Board's prior approval by
resolution. The Oversight Board will consider such resolution at its meeting of June 11, 2014.
The DOF will then review such Oversight Board action.
After the adopted Oversight Board resolution is submitted to the DOF, the DOF will notify the
Successor Agency as to whether the DOF will undertake a review within five business days. If
the DOF decides to undertake this review, the DOF may take up to another 60 days for the
SAORA ITEM 4 6/10/14
review. Accordingly, assuming that the adopted Oversight Board resolution is submitted to the
DOF on June 12, 2014, and the DOF decides to undertake review, the DOF will have until
approximately August 18, 2014 to complete the review.
Based on this schedule, it is estimated that these refunding bonds will be issued in late 2014.
8. ATTACHMENTS
• Resolution No. SAORA -014
• Fourth Supplement to Indenture of Trust
• Debt Service Savings Analysis prepared by Fieldman, Rolapp & Associates
• Fieldman, Rolapp & Associates agreement for Financial Advisor services
• Applied Best Practices for Continuing Disclosure Analysis
• Richards Watson & Gershon agreement for Bond Counsel services
• Quint & Thimmig agreement for Disclosure Counsel services
• Tierra West Advisors agreement for Fiscal Consultant services
SAORA ITEM 5 6/10/14
RESOLUTION NO. SAORA -014
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ORANGE, ACTING AS THE LEGISLATIVE BODY OF THE
SUCCESSOR AGENCY TO THE ORANGE REDEVELOPMENT
AGENCY APPROVING THE SUCCESSOR AGENCY'S ISSUANCE OF
TAX ALLOCATION REFUNDING BONDS AND AUTHORIZING
CERTAIN RELATED ACTIONS
WHEREAS, the Orange Redevelopment Agency (the "Former Agency ") was a
redevelopment agency duly formed pursuant to the Community Redevelopment Law, set forth in
Part 1 of Division 24 of the Health and Safety Code of the State of California ( "HSC "); and
WHEREAS, the Former Agency previously issued multiple series of bonds to finance
and refinance redevelopment projects, including its Tustin Street Redevelopment Project 1997
Tax Allocation Parity Bonds, Series A (the "1997A Bonds "), and its Orange Merged and
Amended Redevelopment Project Area 2003 Tax Allocation Refunding Bonds, Series A (the
"2003A Bonds "); and
WHEREAS, the 1997A Bonds were issued pursuant to a Trust Indenture, dated as of
May 1, 1997, (the "Master Indenture "), by and between the Former Agency and First Trust of
California, National Association (as succeeded in interest by U.S. Bank National Association), as
trustee; and
WHEREAS, the 2003A Bonds were issued pursuant to the Master Indenture, as
amended and supplemented by a First Supplement to Indenture of Trust, dated as of September
1, 2003 (the "First Supplement "), by and between the Former Agency and the Trustee; and
WHEREAS, the Master Indenture, as amended and supplemented by the First
Supplement and two other subsequent supplemental indentures, is referred to herein as the
"Indenture "; and
WHEREAS, pursuant to AB X1 26 (enacted in June 2011) and the California Supreme
Court's decision in California Redevelopment Association, et al. v. Ana Matosantos, et al., 53
Cal. 4th 231 (2011), the Former Agency was dissolved as of February 1, 2012; the Successor
Agency to the Orange Redevelopment Agency (the "Successor Agency "), as the successor to the
Former Agency, was constituted; and an Oversight Board to the Successor Agency (the
"Oversight Board ") was established; and
WHEREAS, pursuant to HSC Section 34177.5(a), the Successor Agency is authorized to
issue bonds (the "Refunding Bonds ") to refund the 1997A Bonds and the 2003A Bonds
(together, the "Refunded Bonds "), to provide savings to the Successor Agency, provided that:
(A) the total interest cost to maturity on the Refunding Bonds plus the
principal amount of the Refunding Bonds shall not exceed the total remaining interest